Trade Value Protection: RVI’s answer to longer loan terms, underwater customers


Dealers want to see their customers back on the showroom floor sooner. But longer loan terms hamper that. Leases are an answer.

The loyalty of a lease customer is higher than a customer who finances their car. Mainstream OEMs are slowly responding with more lease products; slowly, but not fast enough. RVI Analytical Services, Inc. says it has the solution. It’s called Trade Value Protection.

RVI has partnered with NxGen360, LLC to supply this product.

“We believe this will increase loyalty and create value for the customer,” said Richard Marzan, CEO and president of NxGen360.

]Jill Tarallo, COO of NxGen360, discussed the benefits of Trade Value Protection. Tarallo explained that U.S. surveys done for RVI show that the lease customer is far more loyal than the customer who finances their car. Forty-four per cent of lease customers return to the same dealership where they leased their vehicle for another one as compared to 26 per cent of those who finance their purchase.

The loyalty of that second group declines even further over time. (Rene Abdalah, V-P at RVI, said Canadian surveys showed similar behaviour.)

Tarallo said after 45 months of ownership on a 72-month loan, the vehicle owner has 90 days to return to the dealership where they bought it for a new one.

“Now, let’s say the customer paid $26,000 for the car today and the forecasted residual or Trade Value Protection is $18,500.  If the market book value at trade-in is $16,000, for example, Trade Value Protection makes up the difference of $2,500.

“It’s similar to a lease. We aim to close the gap in loyalty between the lease and the loan,” she said.

RVI supplies analytical services to leasing companies and captive finance companies among others. RVI’s affiliate provides the residual value insurance outside of Canada to support the Trade Value Protection product. Headquartered in Stamford, Conn., it has been in business since 1989.

NxGen360 delivers technology solutions for the automotive marketplace as well as administrative services to support the Trade Value Protection product.

Abdalah explained that an RVI survey done last year showed that 75 per cent of the 1,300 car buyers surveyed said a product like this was a “good” or “excellent” idea and over 50 per cent indicated it would influence their purchasing decision.

But don’t expect to see the product for sale in the business office.

“The customer is less receptive when it’s offered there,” he replied.

So Trade Value Protection will be offered as part of the sale price.

“The dealer group, bank or manufacturer will pay for it and include it in the price of the car.”

When Canadian AutoWorld spoke to RVI and NxGen360 in early February, Abdalah said RVI was discussing a potential product launch with a dealer group as well as working with Canadian Black Book to offer the product on a larger scale.

“Our goal is to have one bank and one manufacturer that will launch the product and to have dealer groups or associations in specific geographic locations,” he said.